VABE Exemption

VABE Exemption

1. (1) See whether A101 applies and whether there is a de minimis exemption

2. (2) VABE

   • (i) If the agreement improve production/ distribution, may be exempt [Rec. 6]
   • (ii) Does VABE apply
     • Agreement between parties at different levels of the supply chain relating to goods/services [A2(1)]
     • Only applies to agreements including use of IP rights, where they are not the main object of the agreement [A2(3)]
     • Is the market share of both supplier and distributor 30% or less [A3(1)] [Rec. 7-9]
   • (iii) Do any hardcore restrictions apply
     • Supplier dictating price distributor sells goods on for [A4(a)]
       • Although can suggest a price or set maximum cap
     • Supplier restricting territory [A4(b)]
       • But permitted to exclude sales in supplier's exclusive territory
       • Passive sales (consumer approaches distributor, e.g. online) must be allowed in all territories
   • (iv) Are non-compete obligations breached [A5] [A1(d)]
     • Preventing distributor selling other products indefinitely or after the expiry of the agreement, or for over 5 years (including options to extend)
     • Exception [A5(3)] - non-compete obligations permitted up to 1 year after termination provided:
       • Relates to sale of product that competes with the subject of the agreement
       • Limited to the premises the distributor operates from during the agreement
       • Indispensible to protect know-how transferred to distributor
     • If A5 breached, the offending clause can be severed and the agreement continues without it [Para 71 Guidelines]

3. (3) Self assessment [A101(3)] [s. 9]

4. (4) Application to distribution agreement

   • Permitted
     • Exclusive distribution agreement
     • Purchase from supplier at specified prices
     • Requiring distributor to sell only under supplier's trademark: permitted provided IP is not the main object of the agreement [A2(3)]
   • Not permitted
     • Supplier setting distributor's prices [A4(a)]
     • Prohibiting distributor from selling in an MS where the supplier is not operating and does not have another exclusive distributor [A4(b)(i)]
     • Preventing sale through distributor's website (passive sales cannot be restricted) [Para 52/53 Guidelines on Vertical Restraints]